A brief outline of the structure of the thesis will serve to illustrate the approach to be taken. Chapter 1 is an introductory chapter which describes the scope of the concept of economic regulation and the justifications for regulatory intervention. It identifies the features that should be present in an ideal regulatory regime and describes how the approach to regulation taken in this thesis represents an original contribution to the academic treatment of this area. The research methodology is described, including the approaches taken in the existing literature, and the theoretical, comparative and empirical studies undertaken here. The chapter also discusses the economic and political factors influencing the regulatory process and the relationship between economic regulation and administrative law concepts.
In chapter 2 the evolution of regulatory regimes in the United Kingdom is considered from an historical perspective, with a view to demonstrating the extent to which some of the requisite elements of an ideal regulatory regime have been realised in the past and also to illustrating some of the difficulties and deficiencies of regulatory
Policy (Butterworth, London, 1982) at p 17; Donaldson and Farquhar, Understanding the British Economy (Penguin Books, London, 1988), p 296. Even the United States, often regarded as the bastion o f fi’ee enterprise, exhibits a surprisingly high level o f government regulation, as will be seen in later chapters. See for example the observation of Vogel in "The' New' Social Regulation in Historical and Comparative Perspective", in McCraw (ed).
Regulation in Perspective (Harvard UP, Cambridge, Massachusetts, 1981) at p 185: "Thus the real irony o f the contemporary pattern o f social regulations among the major capitalist democracies is that they, on balance, seem to be most onerous on business in the United States - traditionally regarded as the most conservative and 'pro-business' capitalist polity." 7. See for example Ball and Friedman, "The Use of Criminal Sanctions in the Enforcement o f
Economic Legislation: A Sociological View" (1965) 17 Stan LR 197; Rowan-Robinson, Watchman and Barber, Crime and Regulation: A Study o f the Enforcement o f Regulatory Codes (T & T Clark, Edinburgh, 1990); Ogus, supra note 1, chapter 5.
methods adopted in previous eras. This survey will cover early attempts at economic regulation in Britain from the Tudor and Stuart periods onwards, through to attempts to regulate monopoly power in the succeeding centuries. It includes discussion of the development by the common law of the concept of public utility services and the attendant obligations of their providers to take into account the public interest and to provide a universal service. The role of commission structures in implementing economic and social regulation in Victorian times will then be considered, leading on to the use of nationalised ownership in the present century as a method of imposing direct government control of industry. Finally the era of widespread privatisation of industry during the 1980s will be considered. The emphasis in the course of this analysis will be on learning from the lessons of the past and applying this knowledge to the design of an improved regime of economic regulation which incorporates the benchmark features which are discussed later in that chapter.
Chapter 3 examines public ownership as a technique of economic regulation. This chapter begins by analysing public ownership as a means of regulatory control. It then looks at issues of corporate structure, such as the use of government shareholdings, nominee and independent directors and the shortcomings of these various techniques. The chapter also considers whether a more enlightened form of company law could encourage the use of public ownership as a relatively flexible technique of economic regulation.
Chapter 4 consists of an examination of other methods of economic regulation, including the use of commission and agency structures, franchising, contracting out of services, taxes, subsidies and incentives, consensual processes such as negotiation and bargaining, and industry self-regulation. These varying techniques are evaluated in terms of the regulatory benchmarks set out in chapter 1. The interplay between rules and discretion in the design of regulatory techniques is also considered. This chapter lays the groundwork for the development of a new model of economic regulation in chapter 5.
The features of such a model are described in chapter 5. This model is based on the central concept that the only legitimate form of externally imposed economic regulation in a democratic system is one which allows for competing interests in the
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regulatory system to be assessed and balanced following full consultation and participation by all interested parties. The features of this model form the underlying basis for analysis in the succeeding chapters.
Chapter 6 consists of a detailed examination of economic regulation in the United States as the basis for a comparative study of the possible application of US regulatory techniques in the UK. The background to, and rationale for, US economic regulation will be considered in the context of the development of the independent regulatory agencies, beginning with the Interstate Commerce Commission in 1887. Theories seeking to explain the nature and behaviour of the regulatory agencies in the United States, such as capture theory and various forms of principal and agent based theory, will be discussed. US regulatory techniques, such as rule making and adjudication under the Administrative Procedure Act 1946, will be considered in detail, together with the scope of judicial review of regulatory decisions. Various difficulties with contemporary rule making activity will also be addressed. More recent developments, such as negotiated rule making and the use of consensual procedures in the adjudication context, will also be considered.
The thesis returns to the subject of UK economic regulation in chapter 7. This chapter applies some of the theoretical concepts discussed in chapter 4 to selected areas of contemporary economic regulation in Britain. It summarises the present state of regulatory activity in areas such as the privatised utilities, rail and air transport, television licensing and financial services, and incorporates an examination of the goals of economic regulation in each area, the applicable legislative framework and the regulatory techniques which are employed.
Areas covered include the extent of existing rule making activity, the use of consultative procedures and public hearings, the availability of MMC review, and the existence of self-regulatory approaches. Some areas of the UK economy, such as local bus transport and express coaching, are largely unregulated at present and chapter 7 also looks at the implications of this. In addition the chapter discusses the possible application of US theories as to the nature of the regulatory process discussed in chapter 6, including capture and principal/agent theories. A significant
part of the chapter examines the increasing influence of EC law and practice on UK economic regulation.
Chapter 8 is concerned with the possible application of formalised consultation and participation techniques to the UK regulatory scene. This chapter begins by looking at the existing use of consultative procedures in the UK, in the light of both historical experience and the evolving doctrine of legitimate expectation, and also considers the general issue of parliamentary control over delegated legislation of various kinds. Legislative regimes in force in Victoria, Australia and in Quebec, Canada are considered. It moves on to discuss the desirability of a modified APA-type procedure in Britain and considers what would be involved in introducing such a system.
This exercise involves some consideration of the extent to which the common law already recognises or requires participation requirements in relation to the regulatory process, including some discussion of the role of concepts of fundamental rights in this area, with particular reference to current developments under the European Convention on Human Rights and the Canadian Charter of Rights and Freedoms. The need for an enabling statute and modified judicial review techniques will also be considered.
Case studies of contemporary UK economic regulation are dealt with in chapter 9, which begins by looking at recent experience with the existing use of consultation and participation regimes in various areas of UK economic regulation. Consensual procedures adopted by the Rail Regulator and OFTEL, ITC consultation procedures and the role of CAA public hearings in civil aviation regulation are also examined. Finally the chapter looks in detail at the new OFTEL licence condition dealing with anti-competitive behaviour in the UK telecommunications industry. The object of these case studies is to assess the extent to which existing UK regulatory procedures reflect the characteristics of an ideal regulatory regime, as described in this opening chapter, and to identify areas in which further improvements in the existing regulatory regimes can be made.
A similar exercise is undertaken in chapter 10, which consists of case studies of US economic regulation, building on the theoretical analysis of US economic regulation
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in chapter 6. This chapter looks in particular at the implications of the division of regulatory responsibility in a federal system, the regulatory activities of several state public utility commissions and consumer protection boards, with particular reference to the work of these bodies in the states of New York, Maine and Massachusetts, and the contemporary use of rule making procedures in a federal regulatory agency, the Federal Communications Commission (FCC). These case studies seek to illustrate the current state of rule making and public hearing procedures in the United States, including the increased use of negotiated settlements and similar consensual techniques, the role of judicial review, the extent of judicial deference accorded to regulatory decisions, and the ways in which the consumer interest is represented.
Consumer and enforcement issues arising in the context of economic regulation are discussed in chapter 11. This chapter considers the extent to which economic regulation should reflect the interests of consumers, particularly in relation to other stakeholder groups in the regulatory process, such as shareholders and the regulated firms themselves. It looks at ways of encouraging consumer involvement in regulatory decisions, areas in which the consumer interest is particularly significant and the possibilities for bringing private enforcement actions in the regulatory context.
The role of organised interest groups in this area is also examined and comparisons are made between the UK system and the way in which the consumer interest is represented under the US regulatory system, drawing on the US case studies in chapter 10. The role of formal intervention in the regulatory process and the ways in which representation of the consumer interest in Britain could be enhanced, particularly through the adoption of APA-type procedures, are also discussed.
Chapter 11 also includes an examination of the possible use of innovative regulatory methods in the context of UK economic regulation. The adoption of consensual procedures, such as arbitration, mediation and ADR processes, is considered. The chapter seeks to identify the conditions which favour the adoption of consensual regulatory procedures and the advantages which would be likely to flow from their use. The emphasis is on demonstrating how the use of such processes is likely to
assist in achieving the goals of an improved regulatory regime, while promoting the interests of third parties such as consumers.
Finally, chapter 12 contains a summary and conclusions and seeks to show how the matters discussed in the preceding eleven chapters go to promote the thesis argument expounded in chapter 1. The final chapter also deals with the processes which are best suited to realising the objective of better regulation and the steps needed to achieve these goals in the context of UK economic regulation.